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Thursday, September 28, 2006

It's Taxing, Isn't It?

Okay, this is just wrong. I don't know how many times I've heard in the last 6 years that the Republicans in general and President Bush in particular prefer to tax the poor and give the rich all the breaks. That isn't news to anyone, is it? I remember during the last campaign when President Clinton got some laughs when he said that President Bush's tax cut plan gave him a nice tax break, but he didn't need it. It is the rally cry so often of the Democrats: "Tax the rich!"

So here I am doing a little research and what do I find? According to the IRS, the numbers are not quite what we thought they were. According to them, the average tax rate of the top 1% of taxpayers was 23.5%. (The top 1% made over $328,000.) Overall, for the top 50% of taxpayers, the average tax rate was 13.5%. (The top 50% made over $30,000.) On the other hand, for the bottom 50%, the average tax rate was 3%. What? That's not what we've heard. That looks a lot like the rich are paying a higher rate than the poor. Of the top 50%, the top half of them (the top 25%) pays an average rate of 15.5%, while the bottom half of them pays an average rate of 7%. (To be in the top 25%, you have to make over $60,000.) So the top 25% of taxpayers are paying 15% of their Adjusted Gross Income (AGI), the next 25% are paying 7%, and the last 50% are paying 3%. Somehow that doesn't look like a "tax break to the rich" scheme.

Well, perhaps it's in the term "adjusted". After all their tax breaks the rich get, are they actually paying more? Yes ... yes they are. In terms of share of total income taxes received by the IRS, the top 1% paid 37%, while the bottom 50% paid 3%. In a similar breakdown as the above, the top 25% paid 85% of the total income taxes paid, while the next 25% paid 12% of the total. I don't know. It sounds an awful lot like the rich are the most heavily taxed in our country.

Well, perhaps it's in terms of money? How much was actually paid? The IRS received a total of about $832 trillion in income taxes. The top 1% paid $306 trillion. The top 25% paid $706 trillion. The next 25% paid $99 trillion. The combined total of the bottom 50% was $27 trillion.

Since the president's 2003 tax cuts, the 25% of taxpayers who earn the most accounted for nearly 66% of the nation’s income, but they paid more than $17 out of every $20 collected by the IRS. The top 1% accounted for about 19% of the nation’s income, yet paid almost 37% of all federal income taxes.

I don't know about you, dear readers, but somehow none of this cries, "Too many tax breaks for the rich!" None of this seems to say, "The tax code favors the wealthy!" Maybe I'm just "numbers challenged", but it looks like the tax rates are heavily slanted in favor of the poor, and the rich in this country, as evil as some want to make them out to be, are shouldering the vast majority of the tax burden ... just like the Democrats think they should. So ... why isn't the president getting credit for this?


Anonymous said...

Once again, the liberal media is able to frame the debate. The bottom line is that the conservative plan will always be billed as "helping the rich" and "hurting the poor."

I remember John Kerry actually giving a pained argument, attempting to show that despite the greatest percentage of cuts going to the poor, that the actual dollars showed that the rich were getting the biggest break. Of course, this is technically true, but he and others frame the debate by pretending that money belongs to the government instead of the earners!

Stan said...

I suppose it's all in how one decides to manipulate the numbers, right?

Here's how I can make it look like the rich are getting a bigger break than the poor. Taking the income of the top 1% (starting with $328,000) at an average tax rate of 23.49%, they're paying $77,059 in taxes. The bottom 50% (making less than $30,122) are paying about 3%, so they're paying $904 in taxes. Now, let's give everyone a 2% decrease across the board. Now the top 1% are paying 21.49% and the bottom 50% are paying 1%. That means that the top 1% would get a tax break of $6,561, while those poor folk would only get a break of $602. See? Just because the richest 1% are paying $70,497 and the poorest 50% are only paying $300 in my hypothetical, clearly the biggest break goes to the rich.

Ah, yes, fun with numbers, eh?

Anonymous said...

Some numbers for you to consider...

And an article that might give you a little more information regarding taxation

Stan said...


Thanks for the info. I looked at it and read the very same claims I'm hearing repeatedly that "The wealthiest benefit more from the recent tax cuts" and "the tax burden has been shifted from both the highest and lowest income receivers towards middle income receivers", but I don't see it. We're still talking about "those in the 75th to 94th percentile" bracket, which does not consitute the poor or the middle class, but the wealthy. And while the richest are paying a decreased amount -- and certainly a larger decrease in dollars -- they're still paying the overwhelmingly vast majority of the tax burden. Why is this a bad thing?

Anonymous said...

They bear the "vast majority" of the tax burden because they gain the vast majority of the income. And this is a discussion of income rather than wealth which is much more disproportionate to the wealthy. This also is only a conversation about Federal income taxes. State/local sales taxes tend to be regressive and since the Social Security tax is capped, payroll taxes favor the wealthy as well.

Setting aside practical discussions about collecting revenue in a society where 10 percent of the population has as much income as the bottom 80%, your issue seems to be with progressive taxation.

I would suggest that you go back to the article I suggested about income and taxation and perhaps consider reading his sections on Capitalism.

You are free to feel progressive taxes are "unfair" but I think a basic econ course or lesson on Capitalism would help you understand the basis for progressive taxation. To deny the inherent benefits the wealthy receive that the non-wealthy don't have access to (or as much need for) is choosing to be blind.

I will borrow the following from Doug Bashford

"Progressive taxes (such as income taxes) pay mostly for Rich Boy toys: Desert Storm, Cold War, gunboat diplomacy, the Fed's infinite labor pool (WANTED: unemployment) and any related poverty, NAFTA, GAT, free trade agreements, interstate freeways, National Parks, FBI, CIA, a hot-shot standing military, etc. And regressive taxes: (mostly local sales taxes and fees) go for Poor Boy toys: local roads, hospitals, schools, local parks, libraries, cops, city/county councils, fire fighting, etc...

To oversimplify a bit, a carpenter does not require the Rich Boy toys, and the CEO of GM does not require the Poor Boy toys. And progressive (mostly federal income) taxes soak the rich, regressive (mostly local sales) taxes soak the poor.

So each Boy is largely paying for his own meal."

Flattening out progressive taxation is a bad thing in my mind (especially in a time where we are running a large deficit).

Defense of the wealthy becoming more wealthy (especially through policy action that shifts burden downwards) has always seemed like an interesting position for a Christian to take. Good luck with that one.

Stan said...

It appears that currently the rich pay the largest amount of taxes. Isn't that a good thing?

Defense of the wealthy becoming more wealthy (especially through policy action that shifts burden downwards) has always seemed like an interesting position for a Christian to take.

Is it a better Christian position to say, "Take from the rich and give to the poor"? Is it more Christian to say, "Rich people are required to surrender more (meaning vastly more than they currently do) of what they make because we think they should"? In other words, I don't get the connection to "Christian".

Anonymous said...

Here's the connect Jesus made:

"From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked." Luke 12:48b

"Sell your possessions and give to the poor. Provide purses for yourselves that will not wear out, a treasure in heaven that will not be exhausted, where no thief comes near and no moth destroys. For where your treasure is, there your heart will be also." Luke 12:33-34

Anonymous said...

I think it is a good thing that they pay more but I believe it was a better thing when there was more progressivity to the tax structure. Considering there are already regressive taxes as I pointed out before, flattening out the federal income taxes shifts more burden down.

If tax cuts were the right thing to do (I contend no in a time of war and facing a deficit) the tax cuts should have been more proportionate across the brackets rather than overwhelmining benefiting the very top.

You have not heard me say "take from the rich and give to the poor". The Robin Hood statement sounds terrible but it is simply untrue. Federal taxes pay for the common good which the wealthy inherently receive more benefit from. They are ponying up for a government and society they benefit from.

And yes, I think the principle does apply for a Christian - "to whom much is given, much is expected".

More importantly, Christians should deny true ownership as what we are and what we have is ultimately a gift of God. What does he expect us to do with it. He challenged the rich young ruler that if he wanted to be perfect, he should sell is possessions and give to the poor. I have not lived up to this challenge but I will try to live up to its principle.

One only need to read the warnings in James to see the danger in wealth and the blindness that it can produce. Might God put wealth at our disposal - certainly but the bigger question for one of His followers is what does he expect us to do with it once we have it?

I would challenge you to do a study of Jubilee... why did God set up a system where debts were forgiven every seven years and land was given back to the original inheritor every 50th year? Why did Christ invoke this idea when he said he was annointed to preach the good news to the poor? I would imagine most of the wealthy would prefer a progressive tax system to that system.

Is it possible God did not want wealth disparity to get out of control? Is it possible because those with wealth have power to control/exploit the poor and this is not a good thing? Is it possible, he did not intend to see a very small percentage of his creation in luxury with the vast majority in need?

Thinking of God as a father figure - I cannot imagine having 10 children where 1 child received as much stuff (food, clothes, toys) as 8 of the other children combined. I can't imagine being a parent convinced that that 1 child should get more at the expense of the other 8. Somehow, many conservative Christians can.

Stan said...

Thanks, Brad. Of course, the continuing question remains "Is it the job of Christians to require of non-Christians that they conform to Jesus's instructions?"

I also wonder how far we're willing to take it. If it is wrong for the wealthy to get wealthy, is the right measure to remove from the wealthy whatever it is that differentiates their income from the poor? Is it a sin to be wealthy? Should we mandate (by force of law) that the rich (regardless of their faith) "sell your possessions and give to the poor"? How far do we go with this?

(And to the readers, none of this conversation thus far changes the fact that the richest sector of America is paying 85% of the taxes in America while earning 66% of the income, whereas before 2000 they were paying less.

For comparison sake:
In 1987:
Top 1% - Tax Rate: 26.4% Income: 12.3% Tax Share: 24.8%
Top 25% - Tax Rate: 16.6% Income: 60.7% Tax Share: 76.9%
Bottom 50% - Tax Rate: 5.1% Income: 15.6% Tax Share: 6.1%

In 1997:
Top 1% - Tax Rate: 33.2% Income: 17.4% Tax Share: 33.2%
Top 25% - Tax Rate: 81.7% Income: 65.1% Tax Share: 81.7%
Bottom 50% - Tax Rate: 4.3% Income: 13.8% Tax Share: 4.3%

In 2004:
Top 1% - Tax Rate: 23.5% Income: 19% Tax Share: 36.9%
Top 25% - Tax Rate: 15.5% Income: 66.1% Tax Share: 84.9%
Bottom 50% - Tax Rate: 3% Income: 13.4% Tax Share: 3.3%

In other words, today the top 1% pay a higher percentage of taxes than they did ever before. The top 25% pay a higher percentage of taxes than they did before. And the lowest 50% pay a lower percentage of the taxes than they did before.

I'm not even saying this is a bad thing. I'm asking, "Isn't this what is always being clamored for?"

Anonymous said...

Whereas in 2000 they were making less...

The rich paid more of a share in the taxes because they made more of the share of the income; the poor had less of a share in the taxes because they made less of a share of the income.

I see how this works out for the rich as they are paying a % of their extra income. How does this work out for the poor guy?

By your own logic, we should be storming into our bosses office and demanding a cut in pay so our tax burden would be relieved. Maybe if you can convince me of your logic, I will do just that (I assume you already have).

That is not what is being clamored for.

Anonymous said...

Top 25% - Tax Rate: 15.5% Income: 66.1% Tax Share: 84.9%

Seems pretty fair to me considering this statistic:

As of 2001, the top 1% of households (the upper class) owned 33.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 51%, which means that just 20% of the people owned a remarkable 84%, leaving only 16% of the wealth for the bottom 80% (wage and salary workers).

To who much is given, much is expected. If they possess 80+% of the wealth, should they not contribute 80+% of the taxes?

Stan said...

Perhaps there is a misunderstanding at the core of what I'm saying. I'm not complaining about the current structure. I'm suggesting that it is what is being called for. I'm saying, essentially, it's good. I'm not saying that we should change it. I'm simply asking, "Isn't this what is being called for?"


"The rich paid more of a share in the taxes because they made more of the share of the income; the poor had less of a share in the taxes because they made less of a share of the income.

I see how this works out for the rich as they are paying a % of their extra income. How does this work out for the poor guy?

Since I think it's working out quite nicely, I wouldn't ask to change it. Since the poor guy is paying an average tax rate of 3% while the rich guy is paying upwards of 25%, I'd say that's just fine.

I'm wondering what would be "finer". (Sorry, that's not a word, I know.) Should we redistribute wealth by taxation? Should we tax the richest at, say, 50% and not tax the poorest? How would you redistribute this taxation schedule to make it more ... Christian?

And, Brian, since I think that this isn't a bad alignment of taxation, it isn't logical to say, "By your own logic, we should be storming into our bosses office and demanding a cut in pay so our tax burden would be relieved." If I want to relieve my tax burden I would need to storm Washington and tell them to stop spending so much money.

Anonymous said...

You made an assertion of logic that what was being "clamored" for is what was acheived by your statistics when what it proves is that the more you make, the more you will pay in taxes and the less you make, the less you will pay in taxes.

In your example, the wealthy made more and the less wealthy made less and this "proved" by some measure this was not a bad thing for the poor. If it is not a bad thing to make less a share of the income so your tax burden will be lower, then what were you trying to say??

What would be finer is if there were less income/wealth disparity and whatever the appropriate means to accomplish this goal, that would be a good thing. Just as under God's "Christian" system of Jubilee which helped set the playing field level again on a regular basis, progressive taxation is one means to accomplish this goal. Prior to President Reagan, it was much much more progressive and the relative share of the income rose and fell as a group. Since the Reagan tax cuts that has not been the case - disproportionatly, it is the wealthiest who have benefited. This has been added to by the GW Bush tax cuts. Income disparity is as bad as it has been since 1929.

I like the following quote from Mr. Spock of Star Trek (describing Ardana, where the rulers live in luxury in a cloud city above miners working in misery): "This troubled planet is a place of the most violent contrasts. Those that receive the rewards are totally separate from those who shoulder the burdens. It is not a wise leadership."

I also like a quote by Thomas Jefferson who seemed more practical about the effects of unchecked wealth accumulation "I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right."

Whether I have the "perfect" answer or not is not the point - we are headed in the wrong direction. Even under the "heavy tax burden" the top brackets live under, their share of the national income and national wealth continues to rise. How can this be? Because progressive federal income tax rates have flattened far too much. (along with other tax benefits as well which are not part of this discussion).

I agree with you about the storming Washington to ask them to stop spending so much money - if nothing else GW has been a spender (and yet he feels no need to have the revenue to support it). Hey at least my grandchildren's grandchildren can help pay it off.

Stan said...

Ah, I see the problem. You misunderstood what I meant by "what is being clamored for". The clamor, according to my post, is that the rich should bear a greater tax burden than the poor. You appear to have thought that I was referencing taking care of the poor. That was not my point. Nor was I referencing the rich getting richer. I was referencing the seemingly constant complaint that the rich get all the tax breaks, while the statistics seem to agree that the rich are paying their fair share. (By "fair share" I mean "Those with the most are paying the most.")

Now, if "fair share" means "we need to make sure that everyone is making approximately the same amount of money, so let's take it from the rich and give it to the poor", then, no, it's not a fair share. But I don't think anyone is clamoring for that ... are they?

Anonymous said...

You don't think your equation is a little simplistic?

So as long as one percentage number is higher than the other percentage number, you would define it as "fair"?

How about one guy can work 2080 hours a year for $10,712 (5.15/hr) a year while another guy can work 2080 hours a year for $4,284,800 (2060.00/hr). Simply a meritocracy, right? Surely person B is 400 times more worthwhile than person A.

Once again, your problem seems to be with progressive taxes (or at least being more progressive than they currently are). That is fine, I disagree with you - be well.

Stan said...

Well, according to Brad's statistics above, those who possess 84% of the nation's wealth are paying 85% of the nation's taxes. That seems fair (tax-wise).

I still think you're talking about something other than what I'm talking about. You're talking about the fairness of wealth, and I'm only talking about the fairness of taxation.

But you ask an intriguing question. Person A and Person B work the same number of hours a year. Person A makes $5.15/hour and Person B makes $2060/hour. Clearly Person B is not worth more than Person A. Therefore, we should ...? It seems as if the only answer is that everyone should make the same amount for the same number of hours worked. A pastor should make the same as a CEO. A ballplayer should make the same as a McDonald's worker. (Don't get me started on ballplayers!) Since everyone is worth the same, everyone should make the same. Is that right? Is that biblical? Is that what you would vote for? Is that what you would enact if you were king? Are you thinking that the entire free market and capitalism thing should be done away with?

Again, this is a separate question. I have no problem with progressive taxes. It seems like they are. You apparently want them to be more so. But that seems more like a shift than a fundamental change. In other words, the rich are paying more in proportion to their "richness" (Oh, please, I can come up with a better word than that, can't I?) But it appears that you think they should pay even more ... an equalizer, so to speak. Is that your view?

Brian, please note, your last comment, "Be well", seemed to indicate a sense of frustration. As far as I can tell, we're two Christians having a friendly exchange of ideas. I'm not "ranting" or irate or any such thing. That's why I ask questions. That's why I've tried to insert a bit of humor in everything that I've written ... because I'm not arguing (fighting), I'm simply exchanging views. If I've failed to come across like that, please forgive me.

Anonymous said...

I actually am not talking about the fairness of wealth but I did make allusion to the responsibity of wealth (there is a difference).

My point was "fairness" in income taxation can only be fair if the basis for the income earning has some measure of merit.

For instance, I am CEO of XYZ company. I don't like the idea that I bear an extra burden of responsiblity for taxation. Currently I make 500,000 a year. I do however have the ability to raise my salary to 1,000,000 a year to cover the tax burden I don't want to bear. The majority of my employees do not have that ability - they are "fairly" taxed on the income the market is wiling to bear.

Whatever the effective tax rate, if there is not a "fairness" in the basis for the taxes (in this case income), there is an inherent unfairness.

Did you once hear me suggest everyone should make the same amount per hour and that would be fair - this is a classic straw man and one of the reasons it is unpleasant to discuss things with you at times.

Perhaps every person has an inherent worth (one I would contend there is not enough gold in the world to cover) but their productivity to the work environment/economy is not equal. We live in the ideal that there exists a meritocracy but in reality this is simply not the case. We live in a semi free-market system where incomes are based in large part on what the market will bear. A ballplayer makes insane money because we are willing to fund this form of entertainment. A pastor by and large does not because it doesn't have large market appeal.

How then does one address an inherent unfairness and an every increasing wealth/income disparity? Without killing the free market concept - one tool is progressive taxation. This helps address that CEO who pays himself 400 times the average employee (even though there is no way he is worth 400 of his employees). He is free to do so but the higher up the income scale he goes, the larger burden he bears.

If the progressivity is flattened out, income disparity will increase (as it did under Reagan and as it has under GW Bush). The income disparity is about as bad as it was in 1929.

If I were king, there would be limits on the maximum an officer of a company could pay himself above the lowest paid worker - if he exceeds it, he would pay a levy (progressivly increasing of course). Not many would support it in this country and I am fine with that - I live in a representative democracy.

However, statistically, all boats were headed in a more equitable direction when there was more progressivity in the tax structure. Since it has flattened out, income/wealth disparity has increased. In my opinion, this is a bad thing. I am saddened that I live in a country with a large portion of its citizens that doesn't really care about this.

Stan said...


Only this little, tiny response for the sake of peace.

You said, "Did you once hear me suggest everyone should make the same amount per hour and that would be fair - this is a classic straw man and one of the reasons it is unpleasant to discuss things with you at times."

Please note ... a strawman argument requires an argument. Here is what I wrote: "Since everyone is worth the same, everyone should make the same. Is that right? Is that biblical? Is that what you would vote for? Is that what you would enact if you were king? Are you thinking that the entire free market and capitalism thing should be done away with?" These are not arguments; they are questions. I was floating questions based on the ideas I could come up with to solve what I believed was a reasonable dilemma you raised. They were questions -- "What do you recommend?" -- not arguments -- "Apparently you believe ...". I thought your question was intriguing and I wondered what your remedy was. Nothing more.

Nothing more.

Anonymous said...

Agreed - a strawman argument requires an argument but I never stated or implied you made an argument.

Prior to actually making a straw man argument, the straw man must first be set up.

How does one set up a straw man?

"The Straw Man fallacy is committed when a person simply ignores a person's actual position and substitutes a distorted, exaggerated or misrepresented version of that position."

With all due respect, the following was not really a question "It seems as if the only answer is that everyone should make the same amount for the same number of hours worked." - a position that I never stated or implied and one that could not be well supported. It sounds very much like a distorted, exaggerated or misrepresented version of any reasonable position I might have stated on this issue.

Did you honestly think my stated position would be that a CEO, Pastor and Ball player should make the same $$ per hour and that was the answer to the "fairness" of taxation?

You could just have easily asked the question - what would be your solution to the income fairness issue?

In the end, if I understand where this discussion is left, you feel that the President deserves credit for setting up a tax structure where the rich have been burdened with a greater % of the tax share as that is what the opposition is demanding and you are perplexed why the opposition is claiming this is a bad thing.

My point is that the greater percentage of taxes is due to the fact that they are taking in a higher percentage of the income. This is the only way that their individual tax bills can go down while their % of the tax burden has gone up. Since I believe that the income disparity that exists in the US today is down right immoral - I would see a widening disparity as a bad thing. I am also extremely disappointed that it is such an outspoken man of faith that has enacted policy that has increased this disparity in favor of the very wealthy. I suspect you would find this an inaccurate look at what the President has done.

Why do I care so much? Contrary to what you might think - I don't get irritated because I am simply a Bush-hater - I get irritated because I am a voter in a Democracy and as such am part of the government. I get irritated because I am one who put the man in office whose policy decisions have so egregiously favored the wealthy. I live with sorrow and regret because of it. The best I can image to do at this point is challenge other Christians to look at this through eyes less focused on "political sides" and more on how God would want us to respond to a time where greed and wealth are dictating what is right.

George W. Bush (March 2002): "The growing divide between wealth and poverty, between opportunity and misery, is both a challenge to our compassion and a source of instability. We must confront it."

I contend how he "confronted" it worsened the growing divide and demonstrated our lack of compassion.

Plutarch: "An imbalance between rich and poor is the oldest and most fatal ailment of all republics."

Plato: "The form of law which I propose would be as follows: In a state which is desirous of being saved from the greatest of all plagues -- not faction, but rather distraction -- there should exist among the citizens neither extreme poverty nor, again, excessive wealth, for both are productive of great evil . . . Now the legislator should determine what is to be the limit of poverty or of wealth."

Andrew Greeley: "It should be no surprise that when rich men take control of the government, they pass laws that are favorable to themselves. The surprise is that those who are not rich vote for such people, even though they should know from bitter experience that the rich will continue to rip off the rest of us. Perhaps the reason is that rich men are very clever at covering up what they do."

How do I think God confronted this inevitable disparity in the society/government system he established with the Israelites? Leviticus 25!

The question is how can we find a modern day application of this principle.

Stan said...


I showed that the richest folks in America are paying the highest amount of taxes. I also showed that this condition has increased since 1987. You've denied that you're in favor of "take from the rich to give to the poor", but seem to argue that by taxation the government should do just that. That's what it looks like.

So, what kind of scale would you consider fair? The top 1% are paying 25% of their income in taxes. You would recommend ___? The top 25% are shouldering 85% of the tax burden. You would recommend ___?